Q&A Hero

Q: If Happyland advertises its beaches and attracts tourists, the tourism-related income would be recorded in its ________ account. A) capital B) services C) income payments D) merchandise

Q: Identify the strategic factors that influence a company's international entry mode selection. Explain any three of them.

Q: Transactions involving the export of Happyland's textile and computer products are included in its ________ account. A) capital B) merchandise C) services D) income payments

Q: What are the differences between a turnkey project and a strategic alliance?

Q: Happyland's international trade situation illustrates that the country is experiencing a ________. A) current account deficit B) capital account deficit C) current account surplus D) capital account surplus

Q: What is countertrade? Explain the concept of buyback as a type of countertrade, and discuss buyback as a joint venture configuration.

Q: GMI's subsidiary for component B in Thailand is best described as a(n) ________.A) greenfield investmentB) portfolio investmentC) acquisitionD) merger

Q: What are the advantages of pursuing a wholly owned subsidiary as an entry strategy?

Q: GMI's purchase of the Brazilian company is best classified as a(n) ________. A) greenfield investment B) portfolio investment C) acquisition D) demerger

Q: Explain franchising with examples. Mention the advantages and disadvantages associated with franchising. How is franchising different from licensing?

Q: Which of the following systems of production is used by GMI? A) job B) craft C) rationalized D) customized

Q: Describe the process of how the documentary collection procedure works using an example.

Q: GMI's investments are examples of ________. A) foreign direct investment B) portfolio investment C) vertical integration D) horizontal integration

Q: What are the different financing methods available to exporters and importers?

Q: When a U.S. company buys shares of stock in a French company on France's stock market, the U.S. balance of payments records the transaction as an ________.A) outflow of capital with a plus signB) outflow of capital with a minus signC) inflow of capital with a plus signD) inflow of capital with a minus sign

Q: Discuss the steps companies should take to avoid export and import blunders. How can an advance payment method help exporters reduce financial risk?

Q: Exports and imports of computer software, electronic components, and apparel are included in the ________ account of a country's balance of payments. A) services B) capital C) merchandise D) savings

Q: Why would an exporter use a sales representative or a distributor? Why would the exporter be reluctant to offer an open account payment method?

Q: Exports and imports of tangible goods are included in the ________ account of a country's balance of payments. A) savings B) capital C) merchandise D) services

Q: Explain why companies consider exporting. Describe the four-step model of developing a successful export strategy.

Q: Exports and imports of tourism and business consulting are included in the ________ account of a country's balance of payments. A) services B) merchandise C) capital D) savings

Q: Scenario: Sports Stuff Inc.Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and markets sports products. The company is looking to expand its operations into the European market. Herb believes that if the company expands its product line to include products reflecting sports that are popular in Europe, the company will achieve success there.The board of directors of Sports Stuff is concerned with the firm's lack of experience in foreign markets. To minimize this problem, Herb recommends that the firm create a ________ with a local partner.A) joint ventureB) turnkey projectC) wholly owned subsidiaryD) franchise

Q: A(n) ________ advantage is the one that a company gains from incorporating a business activity within itself rather than leaving it to a relatively inefficient market. A) ownership B) internalization C) location D) comparative

Q: Scenario: Sports Stuff Inc.Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and markets sports products. The company is looking to expand its operations into the European market. Herb believes that if the company expands its product line to include products reflecting sports that are popular in Europe, the company will achieve success there.The CEO of Sports Stuff has decided that the company needs to retain complete control over its operations in Europe. To achieve this objective, Herb would most likely recommend that the firm establish a ________.A) joint ventureB) cross licensing agreementC) wholly owned subsidiaryD) strategic alliance

Q: Which of the following is a major driver of foreign direct investment? A) vertical integration B) horizontal integration C) globalization D) cultural diversity

Q: Scenario: Sports Stuff Inc.Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and markets sports products. The company is looking to expand its operations into the European market. Herb believes that if the company expands its product line to include products reflecting sports that are popular in Europe, the company will achieve success there.Which of the following entry modes would Sports Stuff be implementing if it hires a company to design, construct, and test a production facility on its behalf?A) joint ventureB) turnkey projectC) wholly owned subsidiaryD) franchising

Q: ________ is an investment that does not involve obtaining a degree of control in a company. A) Portfolio investment B) Foreign direct investment C) Horizontal integration D) Vertical integration

Q: Scenario: Sports Stuff Inc.Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and markets sports products. The company is looking to expand its operations into the European market. Herb believes that if the company expands its product line to include products reflecting sports that are popular in Europe, the company will achieve success there.Herb has been exploring another type of entry mode that requires ongoing assistance on the part of one firm, often in the form of start-up capital, management training, or location advice. Herb is most likely considering ________.A) a strategic allianceB) franchisingC) licensingD) a joint venture

Q: The purchase of physical assets or a significant amount of ownership of a company in another country to gain a measure of management control is called ________. A) portfolio investment B) foreign direct investment C) horizontal integration D) vertical integration

Q: Scenario: Sports Stuff Inc.Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and markets sports products. The company is looking to expand its operations into the European market. Herb believes that if the company expands its product line to include products reflecting sports that are popular in Europe, the company will achieve success there.Herb knows that much of the success his company enjoys is due to the patents and copyrights that protect the company's products. If Sports Stuff chooses an entry mode in which it grants another firm the right to use its intangible property for a specified period of time, it would be engaging in ________.A) a turnkey projectB) franchisingC) licensingD) a joint venture

Q: Describe the main political motives behind government intervention in trade.

Q: Scenario: Gro-Tru Grows To EuropeGro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in Central Europe. The company has received several inquiries from potential importers in the region, but in most cases, the potential importers have expressed difficulty in obtaining the hard currency to pay for Gro-Tru's products. Alistair Green, vice-president for business development, is exploring how Gro-Tru can meet the needs of the potential market.In his research, Alistair discovers a type of arrangement in which industrial equipment is exported in return for products produced by that equipment. This arrangement is known as ________.A) barterB) offsetC) switch tradingD) buyback

Q: Transit tariffs have been almost entirely eliminated worldwide through international trade agreements.

Q: Scenario: Gro-Tru Grows To EuropeGro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in Central Europe. The company has received several inquiries from potential importers in the region, but in most cases, the potential importers have expressed difficulty in obtaining the hard currency to pay for Gro-Tru's products. Alistair Green, vice-president for business development, is exploring how Gro-Tru can meet the needs of the potential market.One option that intrigues Alistair is the process in which one company sells to another its obligation to make a purchase in a given country. This arrangement is known as ________.A) barterB) offsetC) switch tradingD) buyback

Q: Unwanted cultural influence in a nation can cause governments to block imports that it believes are harmful.

Q: Scenario: Gro-Tru Grows To EuropeGro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in Central Europe. The company has received several inquiries from potential importers in the region, but in most cases, the potential importers have expressed difficulty in obtaining the hard currency to pay for Gro-Tru's products. Alistair Green, vice-president for business development, is exploring how Gro-Tru can meet the needs of the potential market.Gro-Tru would be engaging in ________, if it decides that in exchange for a hard-currency sale it would make a hard-currency purchase of an unspecified product from the importing nation in the future.A) barterB) offsetC) switch tradingD) buyback

Q: The main cultural motive behind government intervention in trade includes protection of domestic jobs.

Q: Scenario: Gro-Tru Grows To EuropeGro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in Central Europe. The company has received several inquiries from potential importers in the region, but in most cases, the potential importers have expressed difficulty in obtaining the hard currency to pay for Gro-Tru's products. Alistair Green, vice-president for business development, is exploring how Gro-Tru can meet the needs of the potential market.Which of the following methods would Gro-Tru be implementing if it exchanges its products directly for other goods or services without the use of money?A) barterB) offsetC) switch tradingD) buyback

Q: The protection of infant industries by a nation's government can cause more economic harm than good.

Q: Scenario: Gro-Tru Grows To EuropeGro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in Central Europe. The company has received several inquiries from potential importers in the region, but in most cases, the potential importers have expressed difficulty in obtaining the hard currency to pay for Gro-Tru's products. Alistair Green, vice-president for business development, is exploring how Gro-Tru can meet the needs of the potential market.Alistair has identified an option that might help the firm deal with the importer's inability to pay with hard currency. The option involves selling goods or services that are paid for in whole or part with other goods or services. Which of the following methods is Alistair considering?A) auctionB) biddingC) countertradeD) tendering

Q: The protection of infant industries by a nation's government can cause domestic companies to become complacent toward innovation.

Q: The most common economic reason for nations attempts to influence international trade is preserving national security.

Q: Scenario: Wang's Techno ToysAnn Wang has been successfully running Wang's Techno Toys that sells high-tech toys in the domestic market. Continually increasing and stiff competition at home has now forced Wang's Techno Toys to enter international markets through direct exports.Which of the following methods of export/import financing is Techno Toys' bank using if it acts as an intermediary without accepting financial risk?A) documentary collectionB) buybackC) letter of creditD) advance payment

Q: Scenario: Wang's Techno ToysAnn Wang has been successfully running Wang's Techno Toys that sells high-tech toys in the domestic market. Continually increasing and stiff competition at home has now forced Wang's Techno Toys to enter international markets through direct exports.In some countries, people exchange electronic goods for Techno Toys instead of paying money for them. This practice is known as ________.A) offsetB) counterpurchaseC) switch tradingD) barter

Q: Industries considered essential to national security often receive government-sponsored protection.

Q: Freeland's efforts to provide opportunities to its emerging industries is an example of its ________. A) political motive B) economic motive C) cultural motive D) social motive

Q: Scenario: Wang's Techno ToysAnn Wang has been successfully running Wang's Techno Toys that sells high-tech toys in the domestic market. Continually increasing and stiff competition at home has now forced Wang's Techno Toys to enter international markets through direct exports.Which of the following will most likely help Techno Toys sell its toys directly to buyers in the target market?A) agentsB) sales representativesC) export management companiesD) export trading companies

Q: Scenario: Owen's HomeCare ProductsOwen McCain, owner of Owen's HomeCare Products, is considering going international. He feels that the products he manufactures will be well-received, especially in developing countries. He wants to understand the exporting process and then scale his exporting activities accordingly.If Owen's HomeCare Products decides to sell their products to intermediaries who then resell them to buyers in target markets, the company would be engaging in ________.A) indirect exportingB) counterpurchaseC) an acquisitionD) a joint venture

Q: Which of the following motives illustrates Freeland's efforts to protect local jobs? A) political motive B) economic motive C) cultural motive D) social motive

Q: Scenario: Owen's HomeCare ProductsOwen McCain, owner of Owen's HomeCare Products, is considering going international. He feels that the products he manufactures will be well-received, especially in developing countries. He wants to understand the exporting process and then scale his exporting activities accordingly.Which of the following steps would Owen implement toward the end while developing a successful export strategy?A) initiation of meetings with intermediariesB) identification of a potential marketC) commitment of resourcesD) matching of market needs to company abilities

Q: Freeland's protection of its national identity is an example of a(n) ________. A) political motive B) economic motive C) cultural motive D) social motive

Q: Scenario: Owen's HomeCare ProductsOwen McCain, owner of Owen's HomeCare Products, is considering going international. He feels that the products he manufactures will be well-received, especially in developing countries. He wants to understand the exporting process and then scale his exporting activities accordingly.Through his research, Owen learns that the first step in developing a successful export strategy is ________.A) initiation of meetings with intermediariesB) identification of a potential marketC) commitment of resourcesD) matching of market needs to company abilities

Q: Which of the following motives is least likely attributed to Freeland's restriction on free trade? A) political motives B) economic motives C) social motives D) cultural motives

Q: Which of the following statements is true of the strategic factors that influence a company's international entry mode selection?A) Low tariffs and high quota limits encourage market entry by means of investment.B) Companies that produce goods with high shipping costs prefer exporting.C) Companies set up production units in a host market if the total cost of production is lower in the home market.D) Markets that are likely to remain relatively small consider exporting as a viable option.

Q: An additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy is called a(n) ________.A) countervailing dutyB) ad valorem tariffC) antidumping dutyD) compound tariff

Q: Which of the following is a strategic factor that influences a company's international entry mode selection? A) market consumption capacity B) market receptivity C) market size D) market intensity

Q: When a company exports a product at a price that is lower than the price normally charged in its domestic market or lower than the cost of production, it is said to be ________. A) dumping B) ringfencing C) hoarding D) cost-shifting

Q: Which of the following is a disadvantage of strategic alliances? A) They are the most expensive among the investment entry modes. B) They increase the likelihood that one partner will try to take advantage of the other. C) They create future competitors. D) They fail to tap into their competitors' specific strengths.

Q: Which of the following statements is true of local content requirements? A) It is a strategy mainly used by developed nations. B) This strategy enforces companies to locate their manufacturing facilities in their home countries. C) Local content requirements hurt domestic producers through their effect on prices. D) It forces companies from other countries to employ local resources in their production processes.

Q: A ________ joint venture is formed when each partner requires the same component in its production process. A) backward B) multistage C) forward D) buyback

Q: The purpose of ________ is to force companies from other nations to use local resources in their production processes, particularly labor. A) administrative delays B) currency controls C) local content requirements D) voluntary export restraints

Q: Which of the following countries is seen as a threat to national cultures around the world? A) United States B) India C) Russia D) France

Q: Which of the following types of joint ventures involve parties investing together in downstream business activities? A) backward integration B) forward integration C) multistage D) buyback

Q: Which of the following statements is true about cultural influences? A) Culture and trade are independent of each other. B) Unwanted cultural influence in a nation can cause governments to block imports that it believes are harmful. C) The cultures of countries are independent of the effects of exposure to the people and products of other cultures. D) The culture of the United States is readily adapted into the local culture of countries all over the world.

Q: A ________ is a separate company created and owned by two or more independent entities to achieve a common business objective. A) wholly owned subsidiary B) joint venture C) strategic alliance D) turnkey project

Q: Which of the following is an advantage of wholly owned subsidiaries? A) The parent company receives all profits generated by the subsidiary. B) They are the least expensive investment entry modes. C) They help in the sharing of the cost of an international investment project. D) They are the least risky when compared to other investment entry modes.

Q: Which of the following is the main cultural motive behind government intervention in trade? A) promotion of strategic trade policies B) protection of jobs C) protection of national identity D) protection of young industries from competition

Q: Which of the following is an investment entry mode? A) licensing B) franchising C) joint venture D) turnkey project

Q: ________ refers to the unwanted cultural influence in a nation that can cause great distress and lead governments to block imports it believes to be harmful. A) Cultural imperialism B) Cultural protectionism C) Dumping D) Capitalism

Q: Which of the following is an example of a dual use product? A) a blowdryer B) a GPS navigation device C) a food processor D) a vacuum cleaner

Q: When one company is hired to design, construct, and test a production facility for a client, the arrangement is called ________. A) a turnkey project B) licensing C) a joint venture D) franchising

Q: Which of the following statements best differentiates between franchising and licensing? A) Licensing gives a company greater control than franchising over the sale of its product in a target market. B) Franchising is common in manufacturing industries while licensing is primarily used in service industries. C) Franchising requires ongoing assistance from the franchiser while licensing normally involves a one-time transfer of property. D) Licensees must often meet strict guidelines on product quality, day-to-day management duties, and marketing promotions unlike franchisees.

Q: Which of the following do products designated as dual use require before exports can take place? A) currency controls B) countervailing duties C) special government approval D) local content requirements

Q: Which of the following industries is typically protected for national security reasons? A) agriculture B) textile C) automobile D) housing

Q: Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period? A) franchising B) management contract C) licensing D) strategic alliance

Q: Which of the following statements is true of licensing? A) Licensing restricts finances needed for international expansion. B) Cross licensing grants a company the right to use a property but does not grant it sole access to a market. C) A major advantage of licensing is that it is the least risky method of international expansion. D) Licensing increases the likelihood that a licensor's product will appear on the black market.

Q: Which of the following is true of government interventions in a country's trade practices? A) A major economic motive behind government intervention in trade is the protection of jobs. B) A major political motive behind government intervention in trade is the protection of infant industries. C) Government interventions help companies take advantage of economies of scale and be the first movers in their industries. D) Governments intervene to protect only imports, as the protection of exports is handled by private agencies.

Q: Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time? A) franchising B) licensing C) management contract D) strategic alliance

Q: Which of the following is a political motive behind a government's intervention in trade? A) promoting a strategic trade policy B) gaining influence over other nations C) protecting a country from unwanted cultural influence D) protecting young industries from competition

Q: Which of the following is a contractual entry mode? A) wholly owned subsidies B) turnkey projects C) joint ventures D) strategic alliances